Autos, techs lead European markets

Treasury yields put pressure on U.S., Europe markets

LONDON (CBS.MW) -- European markets on Wednesday saw slight gains, as advances in the auto and tech sectors were not enough to lift bourses higher in the midst of pressure from U.S. Treasuries.

The German DAX Xetra 30 index (1876534) gained 0.2 percent to 3,389 and the French CAC 40 index (1804546) was flat at 3,208.

Rising Treasury yields helped lure investors away from equity markets, leading to U.S. stock market declines on Wednesday despite better July retail sales figures than expected. See story on U.S. markets.

In European markets, autos were the top performing sector, helping to recover some lost ground after declines last week. Renault (013190) rose 3 percent and Volkswagen (766400) and BMW (519000) were over 2 percent higher.

But profit-taking hit oil stocks, with Total (012027)
TOT, -1.03%
and Royal Dutch Petroleum (00947)
RD
both finishing with losses of around half a percent on the day.

Lufthansa surprises with operating profit

Highlighting a busy day of European earnings, German airline Deutsche Lufthansa (823212) rose 1.3 percent after posting an operating profit of 65 million euros in the second quarter of 2003, against expectations of a loss and improving its performance from the first quarter's 415 million euro loss.

But it noted that current booking figures indicate no marked improvement can be expected in the second half of the year, and despite the capacity adjustments and cost-curbing measures, Lufthansa said it does not anticipate a positive operating profit for 2003.

"Given the glacial rate of the German economic recovery, the absence of permanent cost reductions through the recent downturn and the negative impact of low-cost airlines, we see no upside in this forecast," noted analysts from Dresdner Kleinwort Wasserstein.

The second quarter "saw the coincidence of near perfect fixed income trading conditions and a relatively rapid rise in equity markets. This degree of alignment of major markets is unusual, and as fixed income returns gradually normalize, a one-for-one hand-off to recovering equity-driven business cannot necessarily be expected," UBS said.

Revenue may "dip somewhat over the remainder of the year," it added. Looking ahead, UBS said: "We do believe that the downward pressure on our industry from the business and market environment is easing, and that the worst is behind us." See story on UBS.

Also in the banking sector, German bank regulators are attending supervisory board meetings on at least ten German banks, the Financial Times is reporting.

BaFin regulators are making regular appearances at the supervisory board meetings at four of Germany's largest banks, Deutsche Bank
DB, -3.52%
(804010) Commerzbank (803200) and HVB (802200) and at Allianz
AZ, -2.24%
(840400)-owner Dresdner Bank.

The report said that the extra vigilance by regulators was prompted by critical finances at WestLB, HVB and others.

Man optimism lifts

German truck maker and engineering group Man (593700) picked up 8.7 percent from its positive outlook. It said second quarter pre-tax earnings slid 29 percent to 55 million euros, slightly higher than analyst estimates on a 2 percent decline in revenues to 3.745 billion euros.

Due to an upward trend in the commercial vehicles and printing machines divisions, Man expects incoming orders to increase significantly from the first half and sees pre-tax earnings for the full year topping 2002's. It added that it expects a sharp upturn in 2004 earnings due to the impact of its restructuring and the expected improvement in the economy.

Swedish insurer Skandia (000011309) rose 14 percent after it said second quarter operating profits eased 37.7 percent to SEK1.034 million ($130 million), within the range of consensus estimates, as it swung to a pre-tax loss of SEK93 million. Sales rose 8 percent in local currency to SEK19.449 billion.

"Although the markets are still weak and uncertain on the whole - with customers bracing a wait-and-see attitude - several of Skandia's units were able after a slow start to the year to report steadily improving sales figures during the spring and summer," said Leif Victorin, President and CEO.

French defense and aerospace group Thales (012132) gained 0.2 percent after it posted a worse-than-expected first half sales drop of 8.5 percent to 4.557 billion euros, driven by currency effects and weakness in its Information Technologies and Services division. Thales said the first half decline was 3.5 percent on an organic basis.

Defense sales eased 4.7 percent to 2.77 billion euros, its aeronautics division slid 6.2 percent to 763 million euros and its IT division stumbled 19.9 percent to 980 million euros.

Beiersdorf rises from report

Beiersdorf (520000) surged 7.1 percent as the German newspaper Handelsblatt said Procter & Gamble
PG, -0.40%
is renewing efforts to acquire the maker of Nivea handcream, citing sources. The insurer Allianz controls 44 percent of the company and is interested in selling its stake, while Tchibo, which holds 30 percent of the company, has been more reluctant to sell its stake. A Procter & Gamble spokesman declined to comment.

Synthes-Stratec surged 8.2 percent in Zurich after it said it will buy rival medical products maker Mathys for SFr1 billion and SFr500 million in shares. Sythes said the deal will be accretive to earnings per share in the first year of combined operations.

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